I am a financial analyst for a ... company considering entering the Austin market. I have been conducting my own research on the state of housing and non-residential markets in Austin. I came across your article through a google search and I am fascinated by the thought put into the dashboard statistics. Thanks for sharing your research. I am puzzled by the fact that although the general macro trends for Austin (population and employment) are robust the ytd building permits are down 19% (units) compared to last year. The rest of the nation is on a upward trajectory as far as permits are concerned. It appears to me there is a lag with the Austin market in terms of permit recovery. Is this purely due to the fact that Austin had excess capacity and slowly the balance between is being met? I would love to hear your thoughts.
Thank you for your note. I have found my market dashboard to be a valuable tool in discussing market dynamics with clients and prospects.
As you noted, underlying economic strength in the Austin/Central Texas area is encouraging. Nonetheless, we have felt the effects of the recession and housing downturn, and distortions created by the last two homebuyer tax incentives. Throughunit sales were down 5.5% year to date compared to 2010:
|Month||Units Sold||YTD Units||Month||Units Sold||YTD Units|
Note that 2011 YTD sales were ahead of 2010 through the first three quarters of the year.
Likewise, residential building permits are down this year:
|2009 - Jan||488||488||2010 - Jan||419||419|
In this case, the YTD total fell behind last year in July, upon the expiration of the 2010 tax credit program, and by the end of November it was 8.2% below 2010. This does not reflect market weakness or builders' lack of confidence. Instead, it is simply a prudent adjustment of supply to match expected demand as closely as possible. While new residential construction came to a virtual standstill in the hardest hit U.S. market areas in 2008 and 2009, builders have continued to invest in the Austin area. Any growth in Las Vegas or Phoenix from close to zero is a large percentage increase, whereas an 8% decline in Austin building permits looks out of step. (All sales and permit data from the Real Estate Center at .)
There is one point relating to Austin's new construction capacity that does hold permitting back somewhat: a shortage of platted lots and subdivisions in outlying areas. This doesn't account for much of the 2011 decline, but in the coming twelve to eighteen months I expect that we will see some impact.
By the way, builders limiting their supply is obviously a source of strength for resale property values, and we have enjoyed relative price stability compared to the cities and states that have suffered the most during the downturn. To the extent that a lot shortage continues to hold construction down we should continue to see resale price strength for the same reason.
Thank you again for your comments and questions. I hope this is helpful.